click to show more information

click to hide/show information About this Show

Nightly Business Report

News/Business. (2010) Alice Rivlin, senior fellow, Brookings Institution; mind and money. New. (CC) (Stereo)

NETWORK
PBS

DURATION
00:30:00

RATING

SCANNED IN
Annapolis, MD, USA

SOURCE
Comcast Cable

TUNER
Channel 78 (549 MHz)

VIDEO CODEC
mpeg2video

AUDIO CODEC
ac3

PIXEL WIDTH
704

PIXEL HEIGHT
480

TOPIC FREQUENCY

Calpers 13, U.s. 8, Us 4, China 3, America 3, Mastercard 3, Basel 2, San Francisco 2, California 2, Dan Grech 2, Abbott 2, Cisco 2, Suzanne Pratt 2, Susie Gharib 2, Alice Rivlin 2, Tom 2, Washington 1, India 1, New York 1, Barron 1,
Borrow a DVD
of this show
  PBS    Nightly Business Report    News/Business.  (2010) Alice Rivlin, senior fellow,  
   Brookings Institution; mind and money. New. (CC) (Stereo)  

    September 13, 2010
    7:00 - 7:30pm EDT  

7:00pm
>> susie: wall street welcomes new global banking rules with a modest rally. stocks move higher on word those changes will be phased in over time, giving banks years to adapt. >> tom: and if you invest in bank stocks, we'll tell you why the international rules could mean more money in your pocket. you're watching "nightly business report" for monday, september 13. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
7:01pm
this program is made possible this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> susie: good evening everyone. bank stocks rallied today, and they gave a boost to the dow. behind the move, tom, new global banking rules agreed to over the weekend in basel, switzerland. the requirements aim to prevent financial crises in the future, and to make the global banking system safer. >> tom: the most critical reform, susie, is a rule
7:02pm
requiring banks to raise their capital cushion. in some cases, banks will triple the funds on reserve. many american banks already meet these standards, but european firms may need to raise more money. regulators around the world have been wrangling over these so- called basel reforms since last year. >> susie: now that the deal is done, suzanne pratt reports banks can try to get back to business. >> reporter: the collective sigh of relief was almost audible on wall street today, and in the offices of many u.s. banks. not only are the new capital standards looser than expected, but there's nearly a ten-year phase-in-- considered an eternity in the marketplace. experts say the so-called basel 3 requirements eliminate some uncertainty for financial stock investors, who were worried the rules would be tougher. k.b.w.'s fred cannon says, more importantly, they should help banks do business more cautiously. >> it means that there is risk retention for the banks. if they make a loan or do a
7:03pm
mortgage securitization or subprime loan, they are going to have to take some risk and hold it on their balance sheet. and, that's a good thing because that's clearly one of the issues that got us into trouble a couple of years ago. >> reporter: some experts also believe the new capital standards will result in the return of juicy dividends, something that's been missing since the financial crisis unfolded. >> the banks have been precluded from paying dividends because they didn't know what capital needed to be, and they had to keep it all. now we see a number of banks that are going to be able to come out next year and raise their dividends. that's important from an investment standpoint. >> reporter: others say banks should now feel more comfortable using their excess capital to buy back shares, make acquisitions or maybe even make new loans. still, the basel agreement consists of broad generalizations without a lot of specifics. credit suisse analyst moshe orenbach says investors need to keep in mind that u.s. regulators aren't done yet making new rules for u.s. banks.
7:04pm
>> the most definitive capital standards will be those written by the federal reserve over the course of the next year. and, they will take these basel standards into account. so, i guess it's fair to say that not all of the uncertainty has been removed. >> reporter: the new capital requirements are considered positive for bank stocks. but, some experts also say investors should only buy the shares if they feel economic conditions and credit quality are improving. suzanne pratt, "nightly business report," new york. >> susie: while banks got a clearer picture on their financial outlook, taxpayers were not so lucky. over the weekend, there were hints from both republicans and democrats about working together to extend tax cuts that expire at the end of this year. but today, it was a different story. senate republican leader mitch mcconnell said he will introduce legislation to extend all the bush tax cuts. and republicans say no one in their party will support a tax hike now. president obama is pushing to extend tax cuts only for families making less than $250,000.
7:05pm
>> tom: here are the stories in tonight's n.b.r. newswheel: those new global banking guidelines helped wall street move higher, the dow jumped 81 points, the nasdaq added 43, the s&p 500 gained 12. volume started the week fairly light, with under a billion shares trading hands on the big board and nearly two billion shares moving on nasdaq. uncle sam ran a $90.5 billion deficit last month. since the beginning of the year, the federal government's red ink totals $1.2 trillion dollars. the head of b.p. thinks claims for its oil spill in the gulf of mexico will be less than the $20 billion it already set aside. still, c.e.o. bob dudley estimates total cost of the disaster, including cleanup, will run about $32 billion. cuba plans to lay off half a million state workers in the next year, starting now. the communist nation called the cuts necessary, citing the international economic situation.
7:06pm
it wants to shift those state jobs over to the private sector. >> tom: still ahead, what investment behaviors do "depression babies" and chinese immigrants share? we'll find out in tonight's "your mind and your money." >> susie: a former i.b.m. executive was sentenced today to six months in prison for securities fraud in the galleon insider trading case. robert moffat was also ordered to pay a $50,000 fine. he's one of a dozen people who have admitted guilt in the case. nine others still face charges. during today's plea hearing, moffatt said he had an intimate relationship with danielle chezzy. she's the consultant for new castle funds, who's accused of giving insider info to galleon group co-founder raj rajaratnam. both chiesi and rajaratnam deny wrongdoing. >> the biggest pension fund in the nation wants to take on more risk. the california public employees retirement system otherwise known as calpers
7:07pm
is like most state pension funds trying to figure out how 20 generate more investment profits so it can support more retirees for a longer time this is one of the stories in the october issue of bloomberg market's magazine which hits newsstands tomorrow. edward robinson is a senior writer and joins us once again from san francisco. welcome back to nbr. >> thank you investment. happy to be here. >> tom: where is it important for investor to know how calpers is investing if they don't benefit from it? >> well, calpers is the largest single source of investment capital in the united states. so it's about $200 billion. so when it makes a move, the market notices. and calpers over the years has been a pacesetter if exploring private equity investing, hedge fund investing, other types of alternative investing. and so when it moves in a direction like that, it has so much capital it sends ripples through the whole market. >> tom: before we talk about the investment moves it has been making it has made a
7:08pm
management move in the past year and a half, back in march of 2009. joseph deer took overs achieve investment officer after a number of scandals at calperss. so what changes does he want? >> well, joe deere was running the washington state investment broad up until the end of 2008. and he has come into really clean up calpers. there has been some influence peddling scandals that have affected it. but more seriously for him is dealing with the underperformance of the fund. calpers lost $70 billion in the crash of '08 and '09. and deere job is to rejuvenate calpers so that it never loses that much again. >> tom: let's look at this underperformance because calpers benchmark is-- over the past decade it is under 3% return and that's even less than the median state retirement plan which is closer to 3.5% so are the funds beginning to question these assumptions of trying
7:09pm
to get close to 8% a year? >> yes, they are. there is enormous pressure on calpers and other public pension funds to lower their investment return assumption to what critics say is a more realistic level, perhaps 6%, perhaps even lower. the difficulty for calpers though in doing that is if they lower their investment return assumption they are going to have to increase the contribution that public workers and the agencies that employ them have to put on the table. and that creates a lot of political ramification for the state. and as you could imagine that is not an easy situation. >> tom: let's ta about the fireworks that calpers has to work with with. you mentioned the largest pension fund out there, $200 billion. and almost half of it is in stocks, a quarter in fixed income and bonds. 14% in private equity, real estate, commodity, inflation linked assets make up the rest. so where likely is it going to make changes? >> well, calpers has to chase growth. to hit that 7.75 number
7:10pm
they're going to have to look overseas. china, india, brazil, other emerging economy. they are also going to have to make more use of other securities besides stocks and bonds such as commodities, currencies. and what deer is nudging the calpers board to look at, and this is very intriguing, is perhaps trading on a daily basis more derivatives, etfs and other instruments that would what law them to huge a lot of this risk as they chase growth overseas. >> tom: looking at a more short term time frames. we appreciate sharing the reporting with us. tonight in san francisco. it is ed robinson. you can read more of his story in the latest bloomberg markets magazine on news stands -- be stands tomorrow.
7:11pm
>> susie: tom, you know what they say about september down here on wall street, it is a time when we get all the meltdowns and sell-offs. but so far the dow is up 5.3% for the month of september, so far so good. >> tom: yeah, so far so good. this has been a month to remember as long as you've been long in the stock market there is no doubt about it here, susie. let's get everybody updated in tonight's market focus. >> tom: the major indices are up four sessions in a row, making this the best september for the dow since 1939. the s&p 500 now is close to where it topped out at in early august.
7:12pm
the index has shot higher by 7% this month. three of the top four gainers for the dow industrials were tech heavyweights, and they were also the most actively traded on the nasdaq. microsoft was the dow's top gainer, jumping more than 5%-- its biggest one-day gain since march of 2009. fueling the buying likely was a bloomberg report the software giant is planning to sell bonds, raising money to pay dividends and to buy back stock. microsoft already has a big cash stockpile, almost $37 billion, so why issue new debt to pay a possible dividend? it's estimated more than 40% of microsoft's revenue comes from outside the u.s., and a chunk of its cash is held outside of america. microsoft could face a tax bill if it brought back that cash to the u.s. intel and cisco were big gainers as well, each up more than 3%. both also have large cash positions.
7:13pm
intel does pay a dividend while cisco does not. thanks to the proposed bank capital standards suzanne reported on earlier, financial stocks pushed higher. u.s. regional banks, especially, saw the buying. the regional bank exchange traded fund tends to be more volatile than the big bank e.t.f., listed below it. today was no exception. the regional bank e.t.f. jumped more than 3%. the big bank e.t.f., which includes, citi, j.p. morgan and others, was up less than 3%. worldwide, the global bank e.t.f. saw a slightly more modest rally. still $1 higher. also in finance, visa and mastercard stocks saw heavy volume as both fell to new 52- week lows. visa dropped 4%. analysts are worried regarding how payment systems may be impacted by financial reform. last week, bank of america merrill lynch cut its rating on visa. mastercard fell more than 2%. sanford bernstein is the latest firm to raise concern, cutting its rating on both stocks today to market perform.
7:14pm
new swipe fees regulations is one worry analysts point to. visa and mastercard earn money by directing card information from a store to the issuer of the card. a new law requires stores have more than one network, instead of exclusive deals. hewlett-packard's buyout binge continues. its latest takeover is tech security firm arcsight. rumors started heating for up last month around arcsight. this h.p. deal gives shareholders $43.50 per share. with the stock closing above that price, the market thinks a higher price will be coming. between this deal, and the bidding war between h.p. and dell for cloud computing firm 3par, there's a new look at data services-- and that may explain moves we've seen lately in xerox. shares shot up to their highest price since early august. barron's reports xerox wants to grow its data services business similar to how h.p. has focused on technology services, not just technology equipment.
7:15pm
watch big defense contractors tomorrow. the pentagon unveils new rules designed to eliminate waste from defense department purchases. lockheed martin is the lead contractor on what will eventually be a $382 billion deal for more than 2,400 joint strike fighter jet planes. shares have been sinking since last april and lost 1% today. and that's tonight's "market focus." >> susie: and the winner is... ebay! after a six-year battle, a federal judge threw out tiffany's last remaining claim against ebay. the jeweler accused the online auction house of deceiving customers by allowing sales of fake tiffany jewelry. ebay called today's ruling a validation of its business practices. tiffany has not commented. this case has been closely watched. big web firms have argued they're only hosting services, and not responsible for a user's trademark violations.
7:16pm
>> susie: what determines your investment personality? is it being born to the right parents? having a lot of money? or being male or female? research suggests the answer may be "all of the above." in tonight's "your mind and your money" segment, dan grech says while some of our investment traits may be inherited, others may develop over time. >> reporter: when it comes to investing, we've seen how some people claim to be "born gamblers" with no problem taking big risks. and some studies suggest that could be an inherited trait. but, what if risk tolerance is actually something you develop-- say, as a result of your life experiences?
7:17pm
and if that's true, how would a person who lived through the great depression feel about risk? let's go back in time, to the 1930s. beverly bierman is 87 years old, and she remembers the depression vividly. >> a lot of time, you'd walk the street and you'd see furniture on the sidewalk. it was a terrible thing. they were evicted because they couldn't pay the rent. and we felt so bad for these poor people. >> reporter: since then, bierman's been very conservative with her finances. and she's not alone. a study called "depression babies" found many members of her generation tended to shy away from risky investments, even decades after the depression. the study's co-author, economics professor ulrike malmendier of the university of california-
7:18pm
berkeley, says this shows a person's early experiences play a big role in shaping investment attitudes. >> environment does matter, and being scarred for life is a very good way to think about it. a person who has gone through a big economic downturn like the great depression, or even think about the current financial crisis, will be a different person afterwards. we will see a significantly different investment behavior. >> reporter: malmendier found the depression left the biggest investment scars on those who were young adults at the time. she says most eventually recovered, as it became a smaller part of their lives. >> but, you also see, ten years after, twenty years after, thirty years after-- the effect becomes less and less and less. >> reporter: that also happens with people who get money values from their culture. take chinese persons who immigrate to america. a new study shows that when they first arrive, they tend to be big savers and to invest in hard assets-- just like people in china.
7:19pm
but, finance professor meir statman of santa clara university found that over time, they alter their money habits. >> when we move from one culture to another, from one country to another, we of course observe the new culture and we learn. and in time, we meld the two. so, chinese americans are more willing to take risks than people who have been in the u.s. for generations, but not as much as people in china. >> reporter: unlike your culture or your memory, one thing that doesn't fade over time is gender. professor brad barber of the university of california-davis studied the records of 35,000 investors and found a big difference between how men and women trade stocks. >> we came in thinking that men would trade more aggressively than women. what we did find was that men traded 50% more frequently than women. so, that's consistent with this notion that men are more overconfident than women. >> reporter: all three of the
7:20pm
professors we talked with agree on one thing. our biases on money matters are both inherited and learned. they believe some may be built into our genetic code or our brains, while others arrive via our cultures or life experiences. still, how do we keep those mental biases from hurting our investment decisions? to find out, we went to this totally unbiased fellow primate. of course, he can't talk, but he seems to be saying "keep your eye on the ball." and for investors, that means "stay focused on the facts." dan grech, "nightly business report," miami. >> tom: here's what we're watching for tomorrow: it will be primary election day in seven states and the district of columbia. the commerce department issues numbers on business inventories for july and retail sales for august. and speaking of retailers, will they be looking for extra help this holiday season? or will a slowdown in consumer spending leave the job outlook flat?
7:21pm
>> susie: the food and drug administration is considering pulling a controversial weight loss drug from the market. the obesity drug meridia, made by abbott labs, has been linked to an increased risk of heart attack and stroke. now the f.d.a. wants an outside panel of experts to weigh in on the drug, and consider a range of actions-- including yanking it off shelves. abbott doesn't actively promote meridia in the u.s., but global sales will run near $30 million this year. >> tom: the number of college students not paying their student loans is climbing, especially for those attending for-profit schools. the department of education says 7% of borrowers default on federal student loans within two years of beginning repayment. that's up from 6.7% the year before. for-profit default rates are more than 11.5%. those schools are fighting new regulations that would cut off federal aid if too many of their students cannot repay loans. vuu?
7:22pm
>> susie: with the mid-term elections just seven weeks away, tonight's commentator is already cheering their end. she's alice rivlin, senior fellow at brookings and former vice-chair of the federal reserve. >> unrealistic expectations caused this deep recession. people who should have known better believed housing prices would never go down, bad loans
7:23pm
packaged in fancy securities would become sound investments, and borrowed money never had to be repaid. but when fantasies evaporated and the economy crashed, common sense did not return. voters transferred their unrealistic expectations to the government. new political leadership would fix the recession fast, create new jobs for all, restore house values, wipe away credit card debts, and send us back to the malls for another spending spree. it didn't happen. the economy is growing again, but not fast enough. new jobs have been created, but not enough of them. housing prices have stabilized, but are not roaring again. now angry voters are looking for new faces to embody their unrealistic expectations. but, anger is not a strategy. when this orgy of blaming that passes for political campaigning is mercifully over, we still need to rebuild the economy,
7:24pm
stabilize the debt, and upgrade skills and infrastructure. we need leaders and followers with patience and common sense to put aside ideology in favor of getting things done. can we forget the unrealistic expectations and work together, or will our fantasies sink us again? i'm alice rivlin. >> thomas: finally tonight, it's a big bucks battle over an american favorite, chocolate milk. but get this-- it doesn't involve real milk! chocolate giant hershey is suing a web software designer, over a program that makes virtual chocolate milk. both companies have similar, but not identical, iphone apps showing virtual chocolate milk drunk or drained from the screen. the software company, hottrix, says its app came first, and also has virtual strawberry and plain milk. and susie, lest you think this is just a tempest in a teapot, it's definitely not. the virtual milk app could be worth millions of dollars, and that is real money.
7:25pm
>> i didn't know about you, but i prefer my chocolate milk real, not virtual. >> susie: what swt explosion, don't cry over spilt milk. but i think in this case, there is no compensation when are you dealing with millions of dollars. >> tom: apparently you can sue over virtual milk, maybe, or perhaps, or at least argue over it. that is nightly business report on this monday, september 13th. thank you for joining us. have a great night, susie. >> susie: i hope you have a great evening as well. i am a susie gharib. good night everyone, thanks for watching. we hope to see you all again tomorrow night. >> nightly business report is made possible by: you you
7:26pm
this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> more information about investing is available in "nightly business report's" videos. to order this dvd, call 1-800- play-pbs or visit online at shoppbs.org.
7:27pm
>> be more. pbs.
7:28pm
7:29pm